Something to think about...

You might be too young to remember Three Mile Island, one of the worst nuclear accidents in recent memory. Permit me to give you a capsule history:

Basically, something went seriously wrong with a major nuclear power plant’s reactor cooling system, resulting in a partial meltdown. A meltdown is when the enriched-uranium nuclear fuel in a reactor gets too hot to be contained in the form of fuel rods, a form which allows the reaction to be controlled, and literally melts down like candle wax into a giant mass whose criticality, that is, rate of reaction, can no longer be controlled. (That’s how the word “meltdown” got into our vocabulary by the way, because of Three Mile Island).

Company and government officials told us that it wasn’t a serious accident. It turned out that it was.

Company and government officials told us that no significant amount of radiation had leaked into the atmosphere. It turned out that it had.

Company and government officials told us that there was no reason to panic. We panicked, silly us.

Company and government officials told us the reactor site would be cleaned up, the reactor fixed and placed back on-line as soon as possible.

That reactor is still off-line.

Do you see any parallels between Three Mile Island, and what’s now going down on Wall Street?

Good News and Bad News

Photo creative-commons Wikimedia.

My friend Niles is a railroad buff. He’s constantly collecting books and magazine articles about railroading history, and is a co-author of this post.

Recently, he found an issue of Trains magazine from May 1972 that had an interesting article by George W.Hilton called "The view of the viaduct from in front of the diner", recounting a rather odd incident on the Erie-Lackawanna Railroad in 1961.

According to Hilton's account, a westbound Erie-Lackawanna train from New York to Chicago, which he was on at the time, stopped at Hornell, NY, about an hour west of Corning, where things got interesting. Not even half a minute had passed since the train left the station to continue on its way when the engineer suddenly saw that just ahead was an eastbound freight train about to enter the main line at a nearby junction, which meant that his passenger train would be right in its path. Not a happy situation, to be sure. The engineer realized that if he jammed on his brakes right away, the freight would hit one of his head-end cars (the closed cars up at the front, for baggage or freight) and miss his single passenger coach, which was the last car on the train. As it turned out, one of the head-end cars was in fact hit by the freight locomotive, and the other cars derailed, but the passenger car stayed on the rails, apparently safe and sound. When the dust cleared, Hilton got up and jumped from the rear doorway of the coach.

Here’s where the story gets interesting. Hilton writes:

"What seemed odd to me was that two soldiers were running around,
obviously in some agitation, with their rifles over their shoulders
and otherwise ready for action. I hadn't seen them previously... From
where had these soldiers come, and why did they appear in such distress?”

It turned out that the freight car which had been hit had been carrying nuclear weapons. The soldiers were responsible for guarding them. The railroad very wisely called up the Atomic Energy Commission (or AEC, forerunner of the present-day Nuclear Regulatory Commission), who had good news and bad news for them. The good news was that no nuclear components were on board. Those were shipped separately through other channels. The bad news was that since all nuclear weapons contain a fairly powerful conventional-explosive detonator, there was some risk of a fairly big bang. The AEC cautioned the railroad against building a temporary bypass or “shoo-fly” track around the wreck to let other trains pass until a safety engineer could be flown in from Washington to oversee the safe removal of the detonators.

I think that the incident depicted in this article is a great metaphor for the fiscal train wreck we’re now witnessing on Wall Street. The safety engineers, Mr. Bernanke and Mr Paulson are recommending a taxpayer-financed three-quarters-of-a-trillion-dollar “shoofly” (the much-talked-about bailout which as of this writing is still not a done deal) for the criminally-mismanaged firms which ran the train off the track in the first place. The porter, Mr. Bush, is trying to reassure the passengers that everything is under control and there’s no reason to panic. Meanwhile, no one knows, or will say how big the explosion from the damaged lead freight car will be, a recessionary fizzle or a 1929-style Armageddon.